Who gets the surplus?
We use raw materials and labor to create additional value out of thin air. The materials are paid for. The labor is compensated. The goods are sold at a profit. A surplus is created.
Let’s assume a typical situation with a person with resources purchasing the raw materials and fronting the labor cost. The person with the resources took a risk and presumably should get something. The person who contributed the labor created the value. Should they get anything beyond compensation for their time?
Let’s say that 50 units of raw materials and 50 units of labor (fully loaded) went into creation of a widget, for 100 total. The widget is sold for 200 units. What should happen?
Capitalism as implemented says that the 100 should go entirely to the provider of capital. Labor has already been paid at a market rate (regardless of whether that constitutes a living wage) and is not owed anything else.
Cooperative socialism says that the inputs and surpluses should be shared by the collective of laborers without regard to what the government dictates. Cooperatives can collectively function as capitalists of a sort in a larger capitalist society. Unions are a prototype of this form.
Democratic socialism says the surplus should go to the society at large, with the people of the society deciding where it will be spent, be that social programs, defense, or whatever. Elements of this already exist in how America has historically been run.
Authoritarian socialism (what most people think of when they hear the term) says the state will take direct ownership of the means of production and apply the surpluses as it sees fit per the direction of unelected leadership.
This question of who should get the surplus is at the heart of our economic debate. If you look at our history and our present, we have no problem redistributing the surplus if we think the recipients are “worthy”. Currently, farmers, the military, and the rich are what our country has decided must be subsidized and funded at any cost.
We could make different choices. We could say that medical providers, teachers, and environmentally sound businesses are worthy. We could say a shorter workweek and more workers at the same price is a more worthwhile goal than reaching theoretical maximum profit. But we don’t, for various reasons.
My fellow small business owners will pipe up and say how they can’t afford to pay more or hire more. That might be true in our current context. But we have to look at the quality of our inputs as well. How much does productivity suffer from the anxiety of living in our current construct? And how much more could you get out of people that would be meaningfully impacted by improved corporate financial results?
I’ve frequently been rebutted with stories of how people got out of difficult situations with hard work. That’s great, and I genuinely applaud you. But if you know better than most how hard it was to claw your way out of poverty, why would you think that crucible is the best way to produce winners? Why is superlativity a requirement just to survive?
Inequality is not inherently problematic. But rising inequality where people working 60+ hours are still poor while others are basically living beyond the event horizon of a cash singularity will not stand indefinitely. History is clear that desperation leads to revolution. We will need to consider changes that will reduce the suffering and desperation in our society if we want something that resembles what we know to continue. And yes, those changes will have to mean benefits for non-white people too, unlike most of the historical benefits and subsidies that created mass affluence in America as practically implemented.
s/o to Professor Richard Wolff for helping clarify my thinking about surpluses.